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PAC Audits

Our Attorneys Represent Political Action Committees (PACs) in Audits Conducted by the FEC, FBI, and Other Federal Authorities

All political action committees (PACs) operating in the United States are subject to the jurisdiction of the Federal Election Commission (FEC), Federal Bureau of Investigation (FBI), and various other federal agencies. Led by the FEC, these agencies conduct PAC audits on a regular basis to assess whether PACs and their officers, directors, and supported candidates are in compliance with all applicable laws and regulations.

These laws and regulations range from federal election and campaign finance laws to tax regulations promulgated under the Internal Revenue Code. While some audits may focus on specific issues (i.e., the campaign contribution limits under the Federal Election Campaign Act (FECA)), many PAC audits are extremely broad in scope. When facing audits, it is imperative that PAC officers and directors have a clear understanding of the scope of the inquiry and tailor their organizations’ defense strategies accordingly.

Experienced Federal Defense Counsel for PAC Audits

At Oberheiden P.C., we have significant experience representing PACs and other political entities and individuals in federal compliance and enforcement matters. This includes PAC audits. While we work with many political action committees to help them maintain compliance and prepare to proactively demonstrate compliance during the audit process, we also provide audit representation for PACs that have not used our firm as compliance counsel.

In all cases, we take the same strategic and forward-thinking approach to PAC audit defense. Audits can lead to substantial civil monetary penalties, and they can trigger criminal prosecution in some cases. Relying on experience gained in private practice and as former U.S. Attorneys and Assistant U.S. Attorneys, our lawyers develop and execute targeted PAC audit defense strategies focused on resolving our clients’ FEC and FBI inquiries as efficiently, favorably, and quietly as possible.

What To Expect During a PAC Audit

When facing a PAC audit, knowing what to expect is crucial. With a clear understanding of the steps involved in the audit process, PAC officers and directors can prepare accordingly, and they can work with their counsel to ensure they are prepared to take the right steps at the right time.

Each federal agency has its own set of auditing protocols, and different agencies have different levels of authority when it comes to matters such as issuing administrative subpoenas and requiring the production of documents and testimony. As most PAC audits involve the FEC, we will focus on the FEC’s processes and procedures:

1. Pre-Audit

The FEC’s audit process begins with a request to the PAC’s treasurer. The FEC will request “preliminary materials” such as bank statements and accounting records, which FEC auditors will review upon receipt. The FEC will then seek to schedule an on-site audit, which may take place at either the PAC’s offices or the offices of the PAC’s counsel. Using counsel’s office affords several benefits; and, in any case, it is imperative that political action committees have their counsel present during all in-person visits from FEC auditors.

2. Fieldwork

The on-site audit, which the FEC refers to as “fieldwork,” takes place in three primary phases. These are (i) an “entrance conference,” during which FEC auditors will review the PAC’s presented records and determine whether to issue subpoenas for additional information; (ii) FEC auditors’ review of the PAC’s records and use of “other audit procedures as deemed necessary;” and, (iii) an “exit conference,” during which PAC auditors will discuss any findings they intend to present to the FEC.

Each of these three phases are critically important, and they all present unique risks for PACs. For example, while PACs must be careful to avoid unnecessarily disclosing unfavorable information during the entrance conference, they must also be careful to avoid raising questions and triggering an FEC subpoena. When FEC auditors are reviewing PACs’ internal financial records and comparing them to PACs’ filed disclosure reports, committees and their counsel must intervene to ensure that the auditors do not reach any unjustified conclusions. Likewise, when FEC auditors are reviewing their preliminary findings during the exit conference, PACs must be prepared to dispute these findings based on information that PAC auditors overlooked or errors the auditors made when conducting their fieldwork.

As the FEC notes, “[t]he length of time required for fieldwork depends on the volume of receipt and disbursement transactions during the audited period, the organization and completeness of committee records, the audit scope and the issues that develop during the audit. If the records are substantially complete, fieldwork typically takes two to three weeks.”

3. Interim Audit Report

After completing the fieldwork stage, the FEC’s auditors will prepare an Interim Audit Report. This report will set out the auditors’ preliminary findings, if any. Upon receiving the Interim Audit Report, the PAC will have a time-limited opportunity to respond—and the PAC must respond to prevent the auditors’ preliminary findings from becoming final.

4. Draft Final Audit Report

If the PAC submits a response to the Interim Audit Report, the FEC’s auditors will review the response before preparing a Draft Final Audit Report. The FEC’s Office of General Counsel (OGC) may review the Interim Audit Report and the PAC’s response as well, and the OGC may include a legal analysis in the Draft Final Audit Report. The PAC is entitled to submit a response to the Draft Final Audit Report, and the PAC can also request an Audit Hearing at this stage.

5. Audit Hearing

If a PAC disagrees with the findings contained in the FEC’s Draft Final Audit Report, the PAC can request a hearing. The PAC must request a hearing and submit its written response within 15 calendar days. In most cases, it will be beneficial to request a hearing, and the PAC’s officers and directors will need to work closely with legal counsel to prepare. Like the audit process, FEC Audit Hearings are subject to a complex set of rules, restrictions, and requirements.

6. Final Audit Report

After reviewing the PAC’s written response and following the Audit Hearing (if requested), the FEC will prepare a Final Audit Report. Along with sending a copy of the Final Audit Report to the PAC, the FEC will also post the report and all other records from the audit on its website.

7. Post-Audit Response

If a PAC receives an unfavorable Final Audit Report, this is not necessarily the end of the process. If there were any flaws in the audit process, if the auditors’ conclusions are flawed, or if the OGC’s legal analysis is misguided, the PAC may have grounds to challenge the outcome of the audit through administrative or judicial procedures.

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd
Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara
Linda Julin McNamara

Federal Appeals Attorney

Aaron L. Wiley
Aaron L. Wiley

Former DOJ attorney

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (DOJ)

Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Risks During PAC Audits

PAC audits can present several risks. As noted above, in addition to leading to financial penalties and negative publicity, these audits can also lead to criminal investigations and charges in some cases. Some examples of issues that have the potential to put PACs and their officers, directors, and supported candidates at risk include:

  • Giving or promising anything of value to public officials or elected candidates (which constitutes bribery under 18 U.S.C. Section 201)
  • Failing to keep accurate books and records
  • Filing inaccurate disclosure reports with the FEC
  • Violating FECA or other federal campaign finance laws
  • Violating the Foreign Corrupt Practices Act (FCPA)
  • Misleading donors, the public at large, or the FEC or FBI
  • Tax evasion and tax fraud

FAQs: PAC Audit Defense

Why is My PAC Being Audited?

 

The FEC, FBI, and other federal authorities target PACs with audits for a variety of reasons. However, most PAC audits result from deficiencies in committees’ disclosure reports. As the FEC explains, “Section 438(b) of the Federal Election Campaign Act (FECA) allows the Commission to audit a committee if its reports do not meet the threshold requirements for substantial compliance with the Act.” With this in mind, when facing FEC audits, one of the first steps PACs should take is to review their disclosure reports with legal counsel to determine if they contain any inaccuracies or deficiencies.

What Time Period Does a PAC Audit Cover?

 

The time period a PAC audit covers depends on the federal agency conducting the audit. FEC audits generally cover a two-year period ending on December 31 of the relevant election year. However, as the FEC notes, “[a]t times, records for activity before and after the audit period may be requested to establish the correct beginning and ending cash-on-hand balances.”

Do I Need to Engage Legal Counsel for a PAC Audit?

 

Due to the risks involved with facing a PAC audit, it is strongly recommended that PACs engage legal counsel as early in the process as possible. The FEC has a designation of counsel form that PACs can submit at any point during the process to direct FEC auditors to communicate with their attorneys.


Speak with a Federal Political Lawyer at Oberheiden P.C. about Your PAC Audit

If your PAC is facing an audit, our federal political lawyers can take control of the audit process and deal with the auditing agency on your behalf. To get started with a complimentary initial consultation, please call 888-680-1745 or contact us online today.

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